AB 1229 Will Make Housing More Expensive

Edward Stringham
L.V. Hackley Distinguished Professor for the Study of Capitalism and Free Enterprise at the School of Business and Economics at Fayetteville State University

We can all agree that housing in California is very expensive and out of reach for many. Governor Brown is considering a measure that will authorize cities throughout California to implement inclusionary zoning ordinances. The measure, AB 1229, should be vetoed, as it would make housing in California less affordable.

These types of policies force builders to sell a certain percentage of units at below market rate pricing. While this sounds like a good idea, it doesn’t make housing more affordable. Under these types of ordinances fewer homes are built and prices are higher for the vast majority of homebuyers.

When builders are forced to sell a unit at a below market rate price they pass that cost on to buyers of market-rate houses. I’ve found that these fees can range from $40,000 per unit to an astronomical $100,000 per unit in some parts of the Bay Area. Too often this puts homeownership out of reach for hardworking families.

As an economist I’ve conducted several academic studies on the impact of these measures. My research shows that these policies do not increase the number of affordable units available and in fact, stall housing production overall. My research found for the 33 cities with data available, in the 7 years after the adoption of inclusionary zoning, 10,662 fewer homes were produced than in the 7 years prior to the adoption of ordinances.

Our economy is just starting to recover. Most economists expect the recovery to be slow. But, housing will drive California’s comeback. The housing sector is one of California’s leading industries.  Certain estimates for 2012 indicates that new housing construction (multi and single family residential) contributed $2.6 billion per year to the state’s economy and supported 154,000 jobs.

Now is not the time for California to implement policies that will restrict building. Rather than increasing costs the Governor should focus on ways to increase supply so more families can experience the American dream of homeownership.

I strongly urge Governor Brown to veto AB 1229 to keep housing affordable and keep the recovery moving.

Dr. Edward Stringham is the L.V. Hackley Distinguished Professor for the Study of Capitalism and Free Enterprise at the School of Business and Economics at Fayetteville State University and an Adjunct Scholar with Reason Foundation in Los Angeles.

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